Chapter 17 Cash, Receivables, and Inventory Management

91) Which of the following has the highest interest rate risk?

A) a 20-year U.S. Treasury Bond

B) Bendix Corporation six-month commercial paper

C) a six-month money market certificate at a federally issued bank

D) a Southwest Airlines bond maturing in four years

92) Which of the following has the least interest rate risk?

A) a six-month unsecured promissory note from International Harvester

B) an eight-year investment certificate from a federally insured bank

C) a 15-year U.S. Treasury bond

D) an AT&T bond maturing in 15 years

93) If you compare the yield of a municipal bond with that of a negotiable certificate of deposit, what is the equivalent before-tax yield of the certificate of deposit if the municipal bond has a yield of 8% per year and the investor has a marginal tax rate of 28%?

A) 8.28%

B) 9.30%

C) 10.24%

D) 11.11%

94) Which of the following are short-term, unsecured promissory notes sold by large businesses?

A) negotiable certificates of deposit

B) repurchase agreements

C) money market mutual funds

D) commercial paper

95) Which of the following is the least liquid?

A) U.S. Treasury bills

B) commercial paper

C) money market mutual funds

D) federal agency securities

96) The financial manager is concerned with

A) striking a balance between holding too much and too little cash.

B) maintaining high levels of profitability.

C) minimizing the chance of insolvency.

D) all of the above.

97) Banker's acceptances have the following characteristics EXCEPT

A) typically maturities of 1 to 5 years.

B) fully taxable at the federal, state, and local levels.

C) are sold on a discount basis and payable to the bearer.

D) are not "issued" in predetermined denominations.

98) If you were a treasurer for a Fortune 1,000 corporation who has responsibility for investing "excess cash balances," which of the following alternatives would you be least likely to select?

A) commercial paper

B) common stock

C) bankers' acceptances

D) U.S. Treasury bills

99) ________ is a short-term promissory note sold by large corporations to raise cash.

A) Repurchase agreement

B) Money market mutual fund

C) Commercial paper

D) U.S. Treasury bills

100) Considerations in the selection of a proper marketable-securities mix include all of the following EXCEPT

A) financial risk.

B) interest rate risk.

C) maturity.

D) liquidity.